The NK-2 homeobox gene of Drosophila is the earliest predominantly neural gene regulator that has been found thus far that is expressed in the ventrolateral neurogenic anlage, which gives rise to part of the central nervous system of the embryo. Genes for proteins that regulate NK-2 gene expression were identified by determining the patterns of NK-2 mRNA in wild type and mutant lines of Drosophila. Dorsal was shown to activate the NK-2 gene in the ventral half of the embryo, but the NK-2 gene is not expressed in the mesodermal anlage due to repression by snail, in the mesectodermal anlage due to repression by single-minded, or in the lateral neuroectodermal or dorsal epidermal anlagen due to repression by an unknown gene regulator mediated by decapentaplegic. Many of the neuroectodermal cells that express the NK-2 gene develop into medial neuroblasts, and/or posterior compartment neuroblasts. Ganglion mother cells and neurons, presumably the progeny of NK-2 positive neuroblasts, also contain NK-2 mRNA. Some NK-2 positive neurons contribute to the commissures and longitudinal connectives of the ventral nerve cord. Mutation of the Delta gene or deletion of the Enhancer of split gene complex, which are required for lateral inhibition, resulted in the ectopic expression of the NK-2 gene in mesectodermal cells and the formation of more thoracic neuroblasts that express the NK-2 gene than was found in wild type embryos. These results suggest that lateral inhibition results in the repression of the NK-2 gene. The consensus sequence recognized by the NK-2 homeodomain was shown to be TNAAGTGG. An abbreviated protein containing the NK-2 homeodomain was synthesized in E. coli, purified, and used to determine the secondary structure of the NK-2 homeodomain by NMR. A helix-turn-helix motif was found. The stability of NK-2 homeodomain secondary structure increased markedly upon binding of the homeodomain to DNA and the length of alpha- helix 3 increased from 11 to 19 amino acid residues.